If someone told you to embark on an investment journey by investing Rs 100 every day, or Rs 3,000 a month, and get back much more than Rs 3 crore after a little over 3 decades, you would probably laugh him/her off. But it is true – such financial miracles can indeed happen. Let’s see how. By the way, we have assumed a return of 12% on your investments, which is not difficult in the long run at all.
But first, you have to choose the right instrument that would generate such returns for you. Systematic Investment plans in mutual funds can offer you such returns without exposing you directly to the vagaries of volatility and unpredictability of the equity markets.
SIP calculator: Start at 25 with this small amount
Let’s turn to a mutual fund SIP calculator to see how the above projection can be realised. Let a person start earning from the age of 25 years. He/she starts saving Rs 100 a day – in other words, Rs 3,000 a month.
Let this person raise his/her investment amount every year by 10%. It means in the first year, he/she invests Rs 3,000 in mutual fund schemes every month. In the second year he/she invests 10% more, or Rs 3,000 + 10% of Rs 3,000 = Rs 3,300.
Raise SIP by 10% a year
In the third year, he/she raises investments via SIP to 10% more. In other words, it becomes Rs 3,300 + 10% of Rs 3,300 = Rs 3,630. In this way, investments rise by 10% of the monthly SIP in the preceding year.
If the person has the rigorous discipline to follow this investment pattern, after 25 years, the total value that is created would amount to Rs 2,65,02,371 or Rs 2.65 crore.
Mutual Fund: Rs 3 crore corpus
Thanks to the compounding effect, the value of the investments would sail past Rs 3 crore by the 31st year. At the end of 31 years, he/she would get a corpus of Rs 3,05,34,080. The very next year, the investment would further rise to Rs 3,51,44,166 or more than Rs 3.51 crore.
Therefore, every year the returns would keep rising by a huge amount if the person can be patient and continue investments. Considering the person begins investing at 25, the amount would be far beyond Rs 5 crore by the time he/she turns 60.
A large number of people can save Rs 100 a day but you will be surprised to know what it can balloon to if you invest in mutual funds through SIPs. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
